Steamboat City Council to see Iron Horse audit

Council to be presented with financial findings at tonight’s meeting

4:15 p.m. Interviews of applicants for the Steamboat Springs Planning Commission. Troy Brookshire, John Fleeker, Monte Lutterman, Kathi Meyer and Jennifer Robbins are applying for three open positions.

5 p.m. Proclamations, recognizing Monday as America Recycles Day in Steamboat Springs and recognizing Dec. 1 as World AIDS Day in Steamboat; Steamboat Springs Chamber Resort Association presentation about summer marketing; discussion and possible approval of city’s agreement with Classic Bicycle Racing, owners of the Quiznos Pro Challenge; first readings of ordinances including allocation of $100,000 for Yampa Valley Housing Authority’s down payment assistance program and three hangar leases at Steamboat Springs Airport; second readings of ordinances including potential adoption of the city’s 2011 budget and potential final approval of the city’s new lease agreement with operators of the Iron Horse Inn

7 p.m. Public comment; Planning Commission referrals, including an appeal of a change to the community housing plan for First Tracks at Wildhorse Meadows, which the Planning Commission denied, and second reading of an ordinance that would enhance enforcement of vacation home rental regulations

Steamboat Springs  The city’s finance director was tight-lipped Monday about results of an audit of the Iron Horse Inn that will be presented tonight in Centennial Hall.

“We have findings to report,” Deb Hinsvark said. “We’ve done what we can in two weeks time.”

City sales tax auditors Rach­elle Summers and Sarah Vale conducted the audit. Hinsvark said methods for reviewing the inn’s revenues and expenditures included examination of supporting documents and tracking reported figures against “reasonableness” — for example, comparing occupancy rates reported at the Iron Horse to occupancy rates citywide. Hinsvark said she’ll present audit information to Steamboat Springs City Council tonight, but she declined to comment further before council members see audit results today.

Boulder-based New West Inns has operated the Iron Horse since November 2009.

City Council members req­uested the audit before they act on a proposed new lease agreement. The agreement would enable New West Inns to repay the city in a 30-month period for about $53,600 in owed Iron Horse rent payments accrued since March.

New West Inns is proposing a new rent structure of $10,000 per month, plus 10 percent of net profits from the preceding month.

The new lease proposal follows the council’s Sept. 7 rejection of a previous rent proposal for $3,000 a month plus 10 percent of gross revenue.

Anne Small, the city’s purchasing and risk manager, has said that agreement — put in place in summer, before City Council action — equated to payments from the inn of about $6,700 for June and about $7,000 for July.

Small said Monday that New West paid the city $7,023 in August and $7,131 in September as part of the agreement that was rejected Sept. 7. New West made a payment of $10,558 in October, she said, under “the auspices of the new agreement.”

City staff waived New West’s monthly rent for December 2009, January and February. The city then deferred Iron Horse rent for March through May as the inn struggled through challenges such as higher-than-expected startup costs and low-performing nightly rentals.

City Council President Cari Hermacinski said Monday that terms of the lease need to be solidified.

“My position is that we should sign the (proposed) agreement sooner rather than later,” she said. “The written agreement that we have in place with New West Inns, I think there’s a strong argument it isn’t in place anymore because it’s been modified so many times in the last 11 months.”

On Oct. 19, the Steamboat Springs City Council gave initial approval to the new lease agreement in a 6-1 vote, with a provision allowing the city audit of the inn’s finances. Councilman Jon Quinn cast the lone “no” vote, saying the audit should be conducted before approval.

City Council tabled Iron Horse action Nov. 2 because the audit was not complete.

The proposed agreement allows the city to terminate the contract without cause and with a 90-day notice to New West. It also requires compensation from New West if the audit shows discrepancies greater than 3 percent.

Interest issues

New West Inns also operates the Comfort Inn, 1055 Walton Creek Road. Glenn Wojcik worked there from November 2009 to June. He expressed concerns about the city’s negotiations Monday.

“The city is bending over backwards with New West on this whole thing,” Wojcik said.

“I think it’s a tremendous exposure to the city of Steamboat Springs, the residents, to allow a private business to continue to operate with a loan from the city and still get 90 percent of the profit that should be due to the taxpayers,” Larson said.

Wojcik and Larson noted that the proposed lease agreement doesn’t charge New West interest for the owed rent.

“We haven’t gotten to that final negotiation of how we’re going to handle that,” Small said Monday.

Hermacinski said not charging interest, similar to the waived or deferred rent, essentially is damage control.

“What we’re trying to do is strike a balance to make sure we get what’s due the taxpayer without basically putting New West out of business,” Hermacinski said. “We’re trying to minimize the loss to the taxpayer right now.”

Quinn, however, said the city could ask for more of New West’s revenues.

“I’m not sure it would be unreasonable to suggest to them they should take no profit out of their ongoing operations until their debt is paid in full,” Quinn said.

Meanwhile, the local lodging industry is preparing for a ski season that’s just more than a week away.

Barbara Robinson, general manager of the Holiday Inn of Steamboat Springs, said she hasn’t talked with other hotel operators about the Iron Horse or the city’s lease negotiations.

“I don’t think anyone is worried about (New West) having an unfair advantage,” she said, calling the issue “very insignificant” in her mind.

She said as snow is falling and winter is approaching, local hotel operators have more pressing concerns.

“I kind of feel like we’re looking for bigger and better things,” Robinson said. “We’re looking for a good ski season.”

How outrageous is it that there is a completed audit THAT IS BEING KEPT SECRET until the meeting? So no one else can review it and provide any useful commentary at the public meeting?

Having the City manage it is probably the second worst idea ever. Only idea that is worse than having City manage it was the decision to buy it.

City should enforce the original contract and maybe let New West pay back the owed rent over the remaining term of the contract. If New West was making lots of money operating the Iron Horse then would they be saying the contract was too favorable to them and so they'll pay more rent?

It would not be shocking if the city made more money when they ran it, I hope the council really is able to re-look at this entire situation and use the Iron Horse for its intended purpose, and that is long term affordable housing. This was not purchased to be used as a cash cow for nightly rentals, but it was to be used as long term affordable housing. The city should take this place back, and run it on behalf of the tax payers as long term housing only, yes that means put a little bit of money in the newer building to make all the units kitchenettes but the return on investment within 2 years would be much better then any deal that is currently on the table.

Well in reading B Robinson's comment it seems the Iron Horse isn't true competition so probably why no Hotel Owners give it much thought. Did over hear One say Tear it down. Sure the City would like to hear that as they pay off the 6 million.

sboat4ever,
Maybe it should be run as long term housing. Having the City run it as apartments is a very bad idea because the City has no expertise in managing apartments and political considerations (such as having to publicly figure out how to remodel units) are likely to result in further bad decisions.

So maybe City should put it out for bid as long term housing and let various investors and property management companies have an opportunity to operate it.